China has emerged as the top producer of climate-changing carbon emissions.

Reuters: David Gray

China, the world's largest carbon emitter, has launched its first carbon trading scheme as it tries to reduce pollution from greenhouse gases.

A platform allowing businesses in the southern city of Shenzhen to trade permits to emit carbon was established on Sunday, and trading began on Tuesday.

Under the scheme, companies will be assigned an emissions quota and will be able to profit from selling excess permits to other firms if they emit below their quota.

China plans to open similar schemes in seven areas including the capital Beijing, the major commercial centre of Shanghai, the port city of Tianjin and Guangdong province before 2014, in what analysts say is a step towards a nationwide carbon market.

The pilot programs will cover areas in which tens of millions of people live and cover far more emissions than the entire carbon market in Australia.

"China has been taking action to reduce pollution and encourage clean energy industries for a number of years now," he told Radio Australia's Asia Pacific program.

"But this is the first time we'll actually see the emergence of an absolute cap on emissions."

The head of Greenpeace's climate and energy campaign in China, Li Yan, said the pilot is a "first step" towards a national carbon trading system.

But analysts have said the scheme, which covers just 38 per cent of the city's emissions, is unlikely to produce significant emissions reductions.

"It only covers less than half of the city's emissions, so the effectiveness in terms of carbon cuts needs to be seen," Ms Li said.

"To me the pilot is necessary homework to get the county prepared on capability to manage carbon."

Because of its reliance on coal and heavy industry, China has emerged as the top producer of climate-changing carbon emissions, ahead of the United States, though its per capita emissions remain far below the US.

China has no targets to reduce absolute carbon emissions and government officials have said they will continue to rise until around 2030.

Beijing is aiming by 2020 for a 40 per cent reduction from 2005 levels of carbon intensity, a measure of the amount of carbon produced per unit of economic output.